Two weeks till News Corp shareholders vote on move

PM - Tuesday, 12 October , 2004 18:40:07

Reporter: Peter Ryan

MARK COLVIN: In a fortnight's time, News Corporation shareholders will cast their vote on Rupert Murdoch's proposal to move the global media company from Adelaide to the US state of Delaware.

The plan received a boost last week when Mr Murdoch succumbed to shareholder demands for tougher corporate governance in Delaware, where such protection is notably weaker.

The attraction of Delaware in fact is so great that more than half America's listed companies and many from overseas choose to be incorporated there.

But will News Corp's backdown put pressure on other Delaware-based companies to listen to their shareholders?

Professor Charles Elson, a corporate law expert at the University of Delaware, has been speaking to our Business Editor, Peter Ryan.

CHARLES ELSON: General Motors is a Delaware corporation. Coca Cola Company is a Delaware corporation. The Disney corporation is a Delaware corporation. The list goes on and on and on.

A Delaware address for a corporation is a very valued commodity in this country.

PETER RYAN: Well News Corporation, like more than half of America's listed companies, is attracted to Delaware because of the lower standards of governance. Is there anything wrong with that at all?

CHARLES ELSON: Well the standards of governance that have come out of Delaware of late have actually been beyond the New York Stock Exchange and other listing agencies, interestingly enough.

The Delaware courts, in the last few years, have moved increasingly in a direction that I think, if not favours investors, certainly balances appropriately the interests of investors and management in a fair way, which is why, frankly, most US institutional investors favour a Delaware incorporation, look to a Delaware incorporation, and consider a move to Delaware from another state, let's say, in this country, to be a very important thing.

PETER RYAN: In announcing the back down last week, News Corporation said it wanted to strengthen the company's already stringent corporate governance provisions. But isn't that an admission that the governance provisions for the move to Delaware weren't good enough?

CHARLES ELSON: Well, any time you make a change, people are going to question why you did it. I think the fact that a change was made, or changes were made, that strengthen the corporate governance of the company, is a great positive.

PETER RYAN: If News Corporation, though, can make such a concession, what sort of precedent does that set for other companies who incorporate in Delaware because of its weaker corporate governance?

CHARLES ELSON: You know, first of all the view that Delaware has quite strong corporate governance, and I think the fact that they had to change to, in the move to Delaware is a great positive, and I think other companies, frankly, are going to have to make similar changes.

The idea essentially, is that the investors own the company, and the company structures have to be such to protect the rights of the investors. It's their money, it's their company in the end and frankly, when a company as large and significant as News Corp makes those changes and moves to Delaware, I think it sends a very strong signal to the world that these changes are necessary.